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Biases of the ordinary least squares and instrumental variables estimators of the intergenerational earnings elasticity: Revisited in the light of panel data

An Erratum to this article was published on 01 November 2008

An Erratum to this article was published on 01 November 2008

Abstract

The OLS estimator of the intergenerational earnings correlation is biased towards zero, while the instrumental variables estimator is biased upwards. The first of these results arises because of measurement error, while the latter rests on the presumption that the education of the parent family is an invalid instrument. We propose a panel data framework for quantifying the asymptotic biases of these estimators, as well as a mis-specification test for the IV estimator.

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Correspondence to Ramses H. Abul Naga.

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An erratum to this article can be found at http://dx.doi.org/10.1007/s10888-008-9105-0

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Abul Naga, R.H. Biases of the ordinary least squares and instrumental variables estimators of the intergenerational earnings elasticity: Revisited in the light of panel data. J Econ Inequal 6, 323–350 (2008). https://doi.org/10.1007/s10888-007-9065-9

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Keywords

  • Intergenerational mobility
  • Measurement error
  • Panel data
  • Biased estimation

JEL Classification

  • I3
  • J62